Key points
2021 recap that will sets the giant up for success next year
New CEO after Jeff steps down from the company he built and …
adding 14 new principal announced as Jeff leaves
Stock has moved sideways over the past year despite the Amazonication of Hollywood
2022 things to look forward to are : AWS, one-day shipping, Prime catalog, and reinvest in the business.
Jim Cramer often refers to Amazon as the death star: “For now, Amazon is indeed the death star,” Cramer concluded. “As long as they continue to provide better goods at a better service, every conceivable competitor is right to be afraid. Be very afraid.”
The stock has been sideways of the past year, partly due to uncertainty of the change in leadership. The question is will these changes steer the big Death Star higher?
Some notable recap in 2021
In 2021, Amazon’s New CEO
Andrew R. Jassy is the CEO of Amazon Web Services. Jassy has led AWS since its inception in 2003. He will replace Jeff Bezos as CEO of Amazon on July 5, 2021; Bezos will become executive chairman. Wikipedia
The incoming Chief Executive Andy Jassy will be awarded more than $200 million in extra stock, which will pay out over 10 years, the company said in a regulatory filing. Jassy's base salary has been $175,000, filings show. Also, he has $45.3 million in previously awarded stock that is vesting this year and had $41.5 million vest in 2020.
In comparison, Jassy's vested equity was still smaller than payouts to rival CEOs in the technology industry. Microsoft Corp's Satya Nadella had $215 million in stock vest for the fiscal year ended June 30, 2020, on top of a base salary of $2.5 million, for instance. Apple's Tim Cook had $281.9 million in stock vest, according to its 2021 proxy.
In 2021, Amazon does Corporate Governance
One of the first changes by the company is that Amazon adds new corporate values as Jeff Bezos prepares to depart. The company's leadership principles get new additions regarding being a good employer and embracing corporate responsibility.
On Thursday, the e-commerce giant updated its list of 14 principles, an internally revered document, adding values that speak to controversies that've dogged Amazon as it's come to dominate multiple sectors of the tech industry. The new values -- "Strive to be Earth's best employer" and "Success and scale bring broad responsibility". In an April letter to shareholders, Jeff Bezos wrote that Amazon needs a "better vision for its employees' success." This comes as there has been news about Amazon's scrutiny from regulators.
Does corporate culture drive financial performance?
In one study, noted in a Forbes article and book published in 1992, HBS Professor James Heskett completed an extensive research project detailing the corporate cultures of 200 companies and how each company’s culture affected its long-term economic performance. The book, Corporate Culture and Performance, argues that strong corporate cultures that facilitate adaptation to a changing world are associated with strong financial results.
One Exhibit in that book highlights the difference in results over an eleven year period between twelve companies that did and twenty companies that did not have this sort of culture.
Source: https://www.forbes.com/sites/johnkotter/2011/02/10/does-corporate-culture-drive-financial-performance/?sh=6f1154e37e9e
The author’s point is simply that corporate culture can contribute meaningfully to financial results, and many people do not give this fact enough attention.
In 2021 Amazon goes to Hollywood
Amazon is known to amazonificate and disrupt industries. Hollywood is no exception.
Amazon reached a deal to acquire MGM for $8.45B. The purchase was the second largest in the tech giant's history, behind its $13.7B transaction for Whole Foods in 2017. Prime Video, Disney+ and perhaps Paramount Plus (VIAC) are the rivals seen with enough scale compete with leader Netflix in the space.
With MGM and given Amazon’ spending power, this will boost its position in the industry. One of the fastest-growing parts of Amazon's business is advertising and the MGM acquisition will allow the company to attach ads to new content, and also creates a fresh vertical and other possibilities for Amazon.
Things to look forward to in 2022
In 2021, the company has set itself up for success, laying the ground work for performance 2022.
The company’s e-commerce growth is stellar, with AWS (value $1B), digital media, advertising and Alexa, and continues improve its e-commerce margins.
Huge momentum in its fulfillment network, doubling down on its one-day/same-day delivery capabilities.
As mention, Amazon goes Hollywood, improving its Prime Video catalog.
Amazon continues to invest back into its business.
Stock performance
Well changes are welcome as the company’s stock performance has been relatively sideways over the past year.
Analyst forecast +24% increase in stock price
The 43 analysts offering 12-month price forecasts for Amazon.com Inc have a median target of 4,100.00, with a high estimate of 5,000.00 and a low estimate of 3,473.00. The median estimate represents a +24.11% increase from the last price of 3,303.52.
source: https://money.cnn.com/quote/forecast/forecast.html?symb=amzn (Jan 11 2022)
The $4,100 stock-price target is based on an enterprise value-to-revenue ratio of 4.1 times our calendar 2022 estimate
Conclusion
While the stock has been sideways of the past year, the question is will these changes steer the big Death Star higher? Although it might be like a new coat of paint on a new ship with a mix of changes, in my opinion, these changes set Amazon up for success. The new changes position the company to be a top contender in the industries it competes in given the (somewhat) fresh blood at the top despite its size.
Disclosure: I/we have positions in the stock(s) mentioned, but have no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from this newsletter). I have no business relationship with any company whose stock is mentioned in this article.